The Undertaker Who Helps Big Banks Write Death Plans

The nation's big banks are writing death plans — living wills that spell out how, in a future crisis, they could be safely dismantled. The idea is that the death plans will help avoid another government bailout of the banks.

"You're technically writing your own funeral, down to the color of the flowers" says Dolores Atallo.

Atallo is part of the living wills team at the consulting firm Deloitte. She shows up to our interview wearing all black, and jokes that she moonlights as an undertaker.

"The regulators are your funeral directors," she says. "They tell you how you're going to be unwound and then they stand over there and say, 'I'm very sorry for your loss.' "

Each bank is now responsible for proving — in detail — that in a crisis situation it could fail without bringing down the financial system. In the case of giant banks, this is ridiculously complicated.

"It's like looking at a bowl of spaghetti and saying, 'Do you know how many strings of pasta are in this bowl?' " Atallo says. "And that's a question the banks need to be able to answer."

That's just the bank side. Now imagine you are the relatively small government agency that will have to actually execute that living will. Sell the bank's assets. Close it down. Insure the depositors.

I watched one living wills meeting at the Federal Deposit Insurance Corporation where more than 20 people spent at least 15 minutes just discussing this one question: If the government took over a huge bank to wind down operations, who would be in charge?

It is reasonable to assume that these living will documents will never actually be used. When it comes down to the wire, the government will bail out the big banks. The government will once again make an exception.

Even if that's true though, Dolores Atallo says planning for death is an incredibly useful exercise. You learn things. You find things in the basement that have no business being there.

"There are legal entities that exist for no reason at financial institutions because they existed for a purpose that people forgot about and its on the books," she says.

At the very least, planning for the end is an interesting thought experiment. An enormous institution can take a good look at itself and ask: Do things really need to be this way? Thinking about death sometimes changes the way you decide to live.

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Transcript

ROBERT SIEGEL, HOST:

The nations' big banks are writing death plans. The last time large financial institutions were sick at the height of the financial crisis, the government bailed them out. Well, now these banks are required to write living wills, spelling out how in a future crisis they could be dismantled peacefully.

Chana Joffe-Walt of our Planet Money team introduces us to a woman who is helping the banks plan their own funerals.

CHANA JOFFE-WALT, BYLINE: No lie, Dolores Atallo shows up to our interview in all black. I wasn't going to go there. She went for the cheap joke.

DOLORES ATALLO: Yes, this wardrobe - I have a second job as an undertaker. It's been cleared by risk management at Deloitte.

JOFFE-WALT: Atallo works for Deloitte, a consulting firm. She is the head of their living wills team. And the living wills idea is this: In the future, if or when there is another banking crisis and a big bank becomes too ill to survive, bank regulators will use the bank's living will as a sort of instruction manual: Here is how to close down the bank.

Which means Atallo's job is to go to bank executives and say things like this: In the event that you cannot care for yourself, how would you like your wishes executed?

ATALLO: You're technically writing your own funeral down to the color of the flowers. The regulators are your funeral directors because they tell you how you're going to be unwound, and then they stand over there and say, I'm very sorry for your loss.

JOFFE-WALT: In 2008, the worst months of the financial crisis, big banks did not die. Large financial institutions were deemed too big to fail. They got bailed out. And then the government swore never again. That whole incident was a special case. No more bailouts.

The government said each bank, from now on, will be responsible for proving that in a crisis situation, it could fail. So Dolores Atallo says she goes through the death process with big banks step by step.

ATALLO: It would be how would you pay your creditors, how would you protect your clients, how would you vacate your premises and break your real estate leases appropriately? What computer systems do you need? What vendors do you have to negotiate with in order to get the data and the information that you want?

JOFFE-WALT: It's important to note that the bank reform law doesn't say you can't be big. Citigroup, Bank of America, JP Morgan, they're all still huge institutions. They just can't be too big to fail. They have to be able to fail.

But if you're a multibillion-dollar institution, imagine mapping out the org chart so that in the event of your death regulators could come in and understand it and take over. Imagine all the risks and deals in one institution, money loaned and money borrowed at any given time.

ATALLO: It's like looking at a bowl of spaghetti and saying do you know how many strings of pasta are in this bowl? And that's a question the banks need to be able to answer.

JOFFE-WALT: When Dolores Atallo first showed up, mostly they couldn't. So they're working on it. There are meetings, phone conferences, living will team leaders. And that's just the bank side. Now imagine that you are the relatively small government agency that will have to actually execute that living will: sell the bank's assets, close it down, insure the depositors. Bank regulators are also convening living wills teams in conference rooms.

UNIDENTIFIED MAN: (Unintelligible) surely...

JOFFE-WALT: I watched this one living wills meeting at the Federal Deposit Insurance Corporation, where more than 20 people spent at least 15 minutes just discussing this one question: If the government took over a huge bank to wind down operations, who would be in charge?

UNIDENTIFIED MAN: Can they really do this?

JOFFE-WALT: It is reasonable to think that these living will documents will never actually be used. But when it comes down to the wire, the government will once again bail out the big banks. It will be a special case. There will be an exception.

Even if that's true though, Dolores Atallo says planning for death is an incredibly useful exercise. You learn things about yourself. You find things in the basement that have no business being there.

ATALLO: There are legal entities that exist for no reason at financial institutions because they existed for a purpose that people forgot about, and it's on the books.

JOFFE-WALT: In the very least, planning for the end is an interesting thought experiment. An enormous institution can take a good look at itself and ask: Do things really need to be this way? Thinking about death sometimes changes the way you decide to live.